STEPS TO SUCCESS FOR RURAL ENTREPRENEURS:
STARTING A SMALL ENGINE REPAIR SHOP
U.S. DEPARTMENT OF COMMERCE ECONOMIC DEVELOPMENT ADMINISTRATION
University of Alaska Center for Economic Development
3211 Providence Drive
Anchorage, AK 99508
Other titles in the Steps to Success for Rural Entrepreneurs series
• Writing Your Small Business Plan
• Starting an ATV/Equipment Rental Business
• Starting a Bed and Breakfast
• Starting an Ecotourism Business in Alaska
• Starting a Fish Processing Plant
• Starting a Rural Alaska Lodge
• Starting a Small Restaurant
This handbook was designed and authored by Christi Bell, Andrew Crow, and John Eric
Humphries. We appreciate and acknowledge graphic design assistance by Clemencia
Merrill of the Institute of Economic and Social Research. Our gratitude also to Ann
Marbourg and Linda Ketchum, who helped edit and prepare the review drafts.
We very much appreciate the financial support of our sponsor, the U.S. Department of
Commerce Economic Development Administration, who made this project possible. The
statements, findings, conclusions, and recommendations are those of the authors and
do not necessarily reflect the views of the Economic Development Administration.
TABLE OF CONTENTS
DEFINITIONS AND BUSINESS PLAN BASICS ........................................................................ 1
What do small engine repair shops provide? ....................................................................... 1
What is a business plan and why do I need one for my small engine repair shop? ............. 2
STEP 1 – CONDUCTING YOUR PERSONAL ASSESSMENT ................................................... 3
What are the benefits of running a small engine repair shop? ............................................ 3
Why do you want to start a small engine repair shop?........................................................ 3
What are some of the drawbacks of running a small engine repair shop? .......................... 4
STEP 2 – DEVELOPING YOUR SMALL ENGINE REPAIR SHOP CONCEPT......................... 6
Small engine repair businesses............................................................................................. 6
Facilities or building requirements ....................................................................................... 7
Records – how will you keep track of things?....................................................................... 7
STEP 3 – UNDERSTANDING REGULATORY REQUIREMENTS ........................................... 10
Business license .................................................................................................................... 10
Fire department permit ........................................................................................................ 10
Insurance requirements and considerations ........................................................................ 10
Zoning requirements............................................................................................................. 11
Reducing risks ....................................................................................................................... 11
Reporting considerations...................................................................................................... 12
Additional resources ............................................................................................................. 13
STEP 4 – CONDUCTING MARKET ASSESSMENT AND RESEARCH .................................... 14
Who are your potential customers? ..................................................................................... 14
What’s the demand for a small engine repair shop?............................................................ 15
Competitive considerations .................................................................................................. 15
Pricing and willingness to pay............................................................................................... 16
Back of the envelope calculation .......................................................................................... 17
STEP 5 – DEVELOPING YOUR MARKETING AND CUSTOMER SERVICE PLAN................ 20
Advertising ............................................................................................................................ 20
Public relations and promotions........................................................................................... 20
STEP 6 – DEVELOPING YOUR ORGANIZATIONAL PLAN.................................................... 22
Ownership considerations (legal structure) ......................................................................... 22
Manager (owner) .................................................................................................................. 22
Building your small engine repair shop team ....................................................................... 23
Ensuring mechanical skills and aptitude ............................................................................... 24
Starting a Small Engine Repair Shop
STEP 7 – DEVELOPING YOUR FINANCIAL PLAN ................................................................. 27
Start‐up costs ........................................................................................................................ 27
Tool, equipment and inventory ............................................................................................ 28
Estimating revenues.............................................................................................................. 30
Estimating costs .................................................................................................................... 31
Fixed costs............................................................................................................................. 31
Variable costs........................................................................................................................ 31
Estimating break‐even point................................................................................................. 33
Break‐even analysis example................................................................................................ 34
Financial statements ............................................................................................................. 35
Income statement................................................................................................................. 36
Cash flow............................................................................................................................... 37
Balance statement ................................................................................................................ 39
Summary ............................................................................................................................... 40
CONCLUSION ............................................................................................................................. 41
Location evaluation worksheet............................................................................................ 45
Guidelines for conditionally exempt small quantity generators (CESQGs) ......................... 46
Occupational safety and health in the automotive repair business.................................... 50
Tables for similar business that can be used for further analysis ....................................... 60
Estimated start‐up costs worksheet .................................................................................... 62
Revenue estimate worksheet .............................................................................................. 63
Estimated fixed costs worksheet ......................................................................................... 64
Variable costs worksheet..................................................................................................... 65
Profit and loss statement..................................................................................................... 66
Balance sheet....................................................................................................................... 67
Cash flow statement ............................................................................................................ 68
Additional sources of information ....................................................................................... 69
Starting a Small Engine Repair Shop
Welcome to this handbook
Starting a Small Engine Repair Shop is a practical and easy‐to‐use guide to opening a
small engine repair business in rural Alaska. One of a series of handbooks developed to
start new Alaska entrepreneurs on the road to success, this handbook takes you step‐
by‐step through the process of assessing the feasibility of your business idea and
developing a business plan. While this handbook should be useful to anyone starting a
small engine repair business in Alaska, it focuses specifically on developing a plan for
this type of business in a community off the road system.
This handbook tells you what to consider in the process of setting up your small engine
repair business and provides an outline for developing your business plan. By following
the steps laid out here, you will be able to decide whether or not opening a small engine
repair shop is right for you. For a more detailed explanation of business planning, see
Steps to Success for Rural Entrepreneurs: Writing Your Small Business Plan.
This handbook helps you to define your business goals and develop your strategy for
achieving success. It covers:
• How to determine if this is the right business for you
• What your start‐up needs will be
• How to assess local markets, estimate demand, and attract clients
• What licenses and permits you will need
• How to project annual revenues and expenses, and break‐even point.
DEFINITIONS AND BUSINESS PLAN BASICS
Small engine repair shops repair anything with small engines: outboard motors,
snowmachines, 4‐wheelers, ice augers, generators, chainsaws, lawn mowers, and other
all‐terrain vehicle (ATV) motors. In other words, motors that essential to life in rural
Alaska. As well as making repairs, small engine repair shops often sell spare parts for
engines. Some small engine repair shops are certified to offer warrantee repairs for the
What do small engine repair shops provide?
The first step in setting up a small engine repair shop is to decide what services
Starting a Small Engine Repair Shop 1
• Will you concentrate on repairing one type of small engine, or will you offer
general repairs for all small engines?
• Will you sell spare parts?
• Do you want to build a relationship with one manufacturer and offer warranty
• Do you want to buy broken motors, fix them, and resell them?
• Do you want to buy broken motors and part them out?
As you can see, there are several business options to choose from. Take some time to
research what others are doing around the state. This will help you decide what
interests you, what the needs are in your community, and how you might develop a
What is a business plan and why do I need one for my small engine
A business plan is a tool that helps you think through the many aspects of starting up
and running a small engine repair business. Writing a business plan makes it clear why
you are starting a business, and keeps you focused as you go into operation.
A good business plan:
• Takes you methodically through the various elements of the business
• Helps you decide if a small engine repair shop is worth your time and financial
• Identifies alternatives and strategies for achieving success, improving your
probability of success.
This handbook walks you through the steps of preparing to write your business plan:
1. Conducting your personal assessment
2. Developing your small engine repair shop concept
3. Understanding regulatory requirements
4. Assessing your market and conducting research
5. Developing your organizational plan
6. Developing your marketing and customer service plan
7. Developing your financial plan.
It is important to understand that not every rural Alaska community can support a small
engine repair business, because the local population may be too small. In some places,
this just might not be a financially viable business.
Starting a Small Engine Repair Shop 2
STEP 1 – CONDUCTING YOUR PERSONAL ASSESSMENT
A small engine repair shop might seem to be a fairly straightforward business, but
owning, operating, and managing this type of business can be quite challenging. As the
owner, you are responsible for keeping the financial records, making payroll and paying
bills, ordering supplies, managing your advertising, and filing taxes. Success in the small
engine repair business requires the same things as success in any business. You need to
make money, comply with government regulations, and follow a financial plan to
What are the benefits of running a small engine repair shop?
Some benefits of being a small engine repair shop owner include:
• Starting something from nothing
• Earning additional income or creating employment for yourself
• Incorporating a potentially interesting business into your life
• Meeting new people from other communities by providing a service.
Owning a small engine repair shop puts you in charge of your own career and financial
future. You get to make your own choices and enjoy your own success.
Why do you want to start a small engine repair shop?
Before considering the more technical aspects involved, you should take the
time to examine your personal reasons for starting a small engine repair business.
Knowing your goals and reasons for going into this business will help you make good
decisions. You might find that there is more work and less financial profit than you are
willing to take on, or too much financial risk. Having your reasons written down can also
remind you on a particularly hard day why you went into this business.
Answer the questions below to find out how running a small engine repair business in
rural Alaska compares to what you really want.
Why do you want to start a small engine repair shop?
How many hours a week are you willing to work to run your business? _______________
Starting a Small Engine Repair Shop 3
Are you willing to operate year round? Yes___ No ___
What yearly income do you need from your small engine repair shop?
Are you willing to be responsible for all business activities? Yes___ No ___
Do you plan on working another full‐ or part‐time job while running your business?
Good responses for why you want to run a small engine repair shop include:
• I enjoy working on engines.
• I like getting “into” a piece of equipment, figuring out how it runs, and
making sure it runs.
• I want to be self‐employed.
• I have prior experience working in or managing a small engine repair shop.
What are some drawbacks of running a small engine repair shop?
Some challenges to consider as you move forward in planning your business include:
• Starting a new business is hard work and requires a lot of time.
• Record keeping is just as important as the engine work. (See Step 2, Records
– How will you keep track of things?)
• Unstable and unpredictable income.
Even if your small engine repair shop is open for only four hours a day, you still need to
put in preparation (ordering supplies and equipment) and planning time, and take care
of administrative tasks (billing clients, collecting payments, filing taxes).
Keep in mind the amount of money you need to make, and see how your financial
projections compare to this financial goal. You might not be able to make this target
with your small engine repair shop.
Starting a Small Engine Repair Shop 4
Small business owners throughout rural Alaska have identified the following small
business success factors 1 :
• Do what you love.
• Do what you know.
• Do seek family support – it is essential.
• Do understand that community readiness and support of the business is
important and for some businesses essential.
• Do seek out training and technical assistance – it is often necessary.
• Do start small, building up your business success gradually.
• Don’t underestimate the role hard work plays in success.
Viable Business Enterprises for Rural Alaska, University of Alaska Anchorage, Institute of Social and
Economic Research, 2008
Starting a Small Engine Repair Shop 5
STEP 2 – DEVELOPING YOUR SMALL ENGINE REPAIR
This step helps you develop and describe your unique small engine repair shop concept.
Your concept should be compatible with your local community and distinguish what you
offer from what your competitors offer.
Before deciding how you will develop your small engine repair shop, you need to
research what similar businesses are doing to be profitable. You should also consider
the following key aspects of your business: available or proposed facilities in your
community, the ability locally to ship heavy equipment, and your target market or the
expected reach of your business.
Small Engine Repair Businesses
Finding out what similar businesses are doing and the types of services they provide is a
very valuable use of your time. Look for businesses in other parts of the state that you
want to be like, and interview the business owners to learn from their experiences. If
you are starting up your similar business in a different region, owners of comparative
businesses are likely to be more willing to share information about their challenges and
what lessons they have learned to stay in business.
Before you consider other business‐related requirements, you should evaluate your
community and its ability to support a profitable small engine repair shop. While small
engine repair shops can cater to community demands in scale and service, your
community may not have enough demand to make it profitable, or there may not be
room for another small engine repair shop. If your community is very small and already
has some sort of small engine repair shop, you might find it hard to develop a new
business, unless you have a significant edge over your competitors. It is very important
to do this kind of research. Use the location evaluation worksheet on page 49 to find out
what your community has to offer, and what competition already exists.
The other aspect of evaluating location is deciding where to locate your small engine
repair shop. The best location for you will depend on the scope of your business and the
layout of your community. You want to be visible and easily accessible to people doing
other things in your community. If in doubt, ask around the community and see where
others think the most convenient location would be. Some small business owners have
developed shops adjacent to their homes. This might be a low cost start‐up alternative
but, before investing in this location, find out whether if there are community zoning or
other requirements that restrict this type of activity.
Starting a Small Engine Repair Shop 6
Facilities or Building Requirements
Your facility needs depend on the type of small engine repair shop you plan to open.
Ideally, a small engine repair shop should have the following:
• Shop space large enough for at least two vehicles
• A small office area
• A small storage facility that can hold parts and supplies
• A protected area for vehicles that are waiting for parts.
You should begin small, finding or developing a shop that meets your basic needs and
offers some potential for future growth. Your floors should be hard and solid and
protected from spills. A garage door enables you to easily maneuver equipment you’re
repairing into your shop, and also provides some protection from the elements.
You will need to scope out your community to find out what your options are. Unless
you have been saving money and have the financial resources to build, a new building is
likely to be too expensive. The ideal building for this type of business is commercial
grade and meets all fire and electrical codes. Since local codes vary for each community,
check with your village or city manager to see what they are in your community.
Your facilities should be well‐ventilated, with the ability to easily add water hookups and
expand the ventilation systems and drainage of the building. The building should also be
well‐lit. You should examine the water, electrical, and waste capacities of the building to
make sure they can support a busy small engine repair shop. A word of caution –
converting a very large older space or building into a small engine repair shop may be
challenging, due to the cost to heat and maintain the building. A smaller space will likely
serve you better.
Finally, the building may require remodeling to be accessible and safe. To meet code,
the building may need more than one exit. Sharp corners, low ceilings, and blocked
hallways should be eliminated. Not only are these important to meet health, safety, and
building codes, they will also lower the potential for injured workers and customers,
which in turn lowers your liability.
Records ‐ How will you keep track of things?
All businesses need to keep good records. Customers will expect you to keep track of
their jobs. The federal government will expect you to keep track of your expenses and
income. You might be the best mechanic around, but unless you keep track of how
much time you have spent on a repair, what parts you have used, or what taxes you
owe, you will soon be out of business.
Starting a Small Engine Repair Shop 7
The small engine repair business is a service business. A key part of any service business
is keeping track of information and activities. Your customers will expect accurate
estimates before you begin work, so they know how much they will be charged. They
will want to know that their engines and parts are safe with you. Think about how you
will keep track of the estimates you give, and the equipment you take in to repair. It
might be wise to have a policy of returning old, damaged parts to customers, so they
understand the reason why the parts needed to be replaced. To do this, you must be
able to keep track of each job. Some things to consider are:
• Will you give written estimates?
o If so, where will you keep your record copy?
o What information will you need to help keep track?
Engine type and year?
• How will your keep track of customers’ jobs?
o Have a number for each job or use customer’s name?
o Attach a ticket to each job?
o Put old parts in box with job?
o Who will be responsible?
To stay in business, you also need to keep track of your expenses and your income. You
should establish a system for invoicing your customers and getting paid for your work.
You will need to track not only how much you have paid for parts and materials, but also
how much it will cost you to replace the parts and materials you have used. While you
must do this in order to file your taxes, it is equally – if not more – important to keep
track of your income and expenses, to make sure your business is running efficiently.
• How will you keep track of what you have spent on each job?
o Invoice sheet?
o Customer file?
o Computer, paper copies or both?
• How will you keep track of parts and materials inventory?
o Keep a paper or computer ledger?
o Keep parts catalogues?
o Call the distributor each time you use a part, and keep track of the
Starting a Small Engine Repair Shop 8
Your answers to the following questions will also determine your overall
readiness for owning and operating a small engine repair shop.
Are you comfortable with all people? Yes ___ No ___
Can you take criticism well from customers? Yes ___ No ___
The information from your location evaluation worksheet will also help you decide what
kind of small engine repair shop you should open, what other services you should offer,
and what size your potential market is. Use these answers as a starting point for refining
your small engine repair shop concept.
In addition to the above location questions, think about your personality. Are you the
type of person who is willing and able to do what it takes to run and manage a small
engine repair shop, or would you really rather work in a shop as an employee?
Starting a Small Engine Repair Shop 9
STEP 3 – UNDERSTANDING REGULATORY
The next important questions and step to consider is, “What legal or regulatory
responsibilities do I need to comply with?” Small engine repair shops, because of their
potential environmental impacts, are subject to local, state and federal requirements. In
this business, you will use and accumulate waste oil, batteries, aerosol cans, and
solvents. All of these are hazardous, and you must dispose of them properly.
It will be your responsibility to find out which specific requirements apply to your
situation, and to comply with them. In this step, you will learn the scope of these
requirements and what planning is necessary to start your small engine repair business.
The regulations and/or permits you will need to consider are, at a minimum:
• Licenses and permits
• Insurance requirements and considerations
• Reducing risks
• Reporting considerations.
You will need to have a standard State of Alaska business license for your small engine
repair shop. This costs $100 a year, and obtained from the Department of Commerce,
Community and Economic Development (DCCED). For more information, call 907‐269‐
8173 (Anchorage) or 907‐465‐2550 (Juneau). Applications are available online at
To get your license, you need to provide your name and address, the name of your
business, and the appropriate NAICS business code. The entire list of business codes is
published on the DCCED website, along with guidance for choosing your code.
Fire Department Permit
Your local fire department and/or the state fire department may require you to obtain a
permit if your business is open to the public. In most cases, you will need to get your
permit before opening for business. The fire department may schedule periodic
inspections to ensure your facility continues to meet regulations.
Insurance Requirements & Considerations
The two major types of insurance you will need are property and casualty (or property
and liability), and life and health. Property and liability are the most important for a
business. Property coverage includes insurance on your buildings and other property in
Starting a Small Engine Repair Shop 10
the case of fire, theft, and other losses. Liability insurance protects you against claims of
injury or property loss resulting from negligence. Life and health are generally part of
the employee benefit package. The law requires some types of coverage, and others
simply make good business sense.
Most property and liability insurance needs can be insured through a package policy,
but you may need to buy special coverage policies separately. The special policies will
depend on the location of your business. One example is business interruption
insurance, which can provide sufficient funds to pay fixed expenses during a period of
time when the business is not operational due to damaged or destroyed equipment or
buildings. To determine your specific insurance needs, contact an insurance agent.
Zoning classifications for a small engine repair shop vary from community to
community. Zoning should be one of the first places you check to find out what your
community zones as allowable or unallowable. Often, a small engine repair shop is
classified as a commercial business, and a zoning exemption must be obtained to
operate this type of business in an area zoned residential. If you intend to construct a
new facility, use an existing building for a different purpose, or perform extensive
remodeling, you should check the local building and zoning codes.
Because small engine repair involves working with grease and oil, this type of
business is strictly regulated. If you fail to comply with these regulations, it will
cost you more money, which is never good for a business. You can reduce your
waste, and your risk, by taking these low‐cost precautions.
• Pick items up and have good housekeeping, which will prevent spills and waste.
• Use quality, resealable containers to reduce loss from spills and evaporation.
• Maintain proper inventory control so you use only what you need.
• Keep wastes separate to make recycling easier. (For example, keep solvents out
of used oil.)
• Check and repair all potential sources of leaks, at least weekly.
• Use mechanical cleaning or stripping, when possible, rather than using solvents.
• Use storage shelves designed to protect materials from earthquake damage and
other impact damage.
• Educate your employees about waste reduction and hazardous materials
• Find another business that can use your waste as an energy source.
• Use old solvent for a first rinse, to extend the life of the fresh solvent.
Starting a Small Engine Repair Shop 11
• Change plant operations and/or procedures by improved housekeeping, and
educating employees about waste reduction.
• Substitute non‐toxic materials for toxic materials in the production process.
• Reclaim (recycle) materials to avoid creating waste.
• Modify equipment to improve efficiency.
The Federal Resource Conservation and Recovery Act (RCRA) regulate the storage,
handling, transportation, and disposed of waste oil. If your business produces less then
100 kg (220 pounds) a month, it is considered a conditionally‐exempt‐small‐quantity
generator (CESQG), and you need not worry about so many regulations (see page 46).
For information on recycling hazardous material, the equipment needed, vendors,
treatment of the materials, hazardous waste facilities, storage of the materials, and
compliance when using materials like oil, batteries, and aerosol spray cans in the shop,
call the Compliance Assistance Office at 1‐800‐510‐2332. Check with your local
government to find out how hazardous wastes are disposed of in your community, and
whether or not there are additional local regulations. If you are transporting hazardous
materials or waste, you must comply with the Department of Transportation’s (DOT)
regulations. The distributors from whom you purchase these materials should be able to
provide you with this information.
As a small engine repair business owner/operator, you must keep good accounting
records to comply with the tax requirements of the Internal Revenue Service (IRS) and
your borough or local community. Accurate records are also essential to managing and
directing your small engine repair shop. If you hire any employees, you will be subject to
a number of additional regulations. The IRS will require that you withhold taxes and file
either a W‐2 or a 1099 form for each employee.
If you do have employees, your business will come under the jurisdiction of the
Occupational Safety and Health Administration (OSHA), and will be subject to
inspections to make sure it complies with all safety regulations (see page 50).
The State of Alaska requires that you provide each employee with workers’
compensation insurance. You may also want to offer your employees life and health
insurance as part of their benefit package. If, like many small business owners, you
decide to take care of your own accounting and reporting, you should attend a class on
standard bookkeeping, and also consult the IRS to fully understand the requirements for
your particular situation.
Starting a Small Engine Repair Shop 12
• Attorney: It is advisable to engage an attorney at start‐up to check over your
paperwork and any legal issues, before you start operations. This will save
you money later, and gives you a working relationship with a local attorney,
should problems arise in the future.
• Accountant: If you have no experience with business accounting, you might
want to pay for the services of an accountant. Even if you plan to do your
own bookkeeping, you might want to use an accountant to file your taxes.
Starting a Small Engine Repair Shop 13
STEP 4 – CONDUCTING MARKET ASSESSMENT AND
To make money, a small engine repair shop must offer the services that people are
willing to pay for. It also needs enough customers to stay in business. One of your first
tasks is to identify your market. Who will buy the services you want to offer? What
competition exists, or what alternatives do your potential customers have?
Your main objective in conducting a market assessment is to understand your potential
customers better. The research you do in this step will help you answer the following
• What potential customers already exist in your region and/or community?
• What are these customers willing to spend money on?
• What is the price sensitivity of these customers?
• What repairs will customers make on their own, and what services can you
augment or provide that they don’t want to, or can’t make on their own?
• Can you describe a typical customer (age, gender, education, income,
• How does your proposed small engine repair shop compare to the competition?
Before you begin gathering information and making personal contact with
potential customers, create a system for organizing and referring to the data
you collect. Depending on the complexity of your business, this could be a
software database designed specifically for this type of business, or a simple
Excel‐type spreadsheet. This data will be very valuable once your business is operating,
as you look for new ways to sell to your customers. Also, business owners tend to over‐
estimate the demand for their services, and your database records can help you
estimate true demand.
Who are your potential customers?
A small engine repair shop located in a hub rural Alaskan community is going to operate
quite differently than one located in a smaller, more isolated rural community. If you are
located in a larger rural community, you might want to increase your overall market
potential by targeting regional customers passing through the airport hub. Possible
customers might include:
• Local community members
• Contractors in your community for government or construction work
• Seasonal community members, such as commercial fishermen.
Starting a Small Engine Repair Shop 14
The following questions will help you think through who your customers, or
market, might be. Think about who might be interested in having you repair
• Are you going to focus just on your village? Or will you also target potential
customers from other villages?
• Are there seasonal businesses in your area, such as lodges and canneries that
might use your services?
• How will your customers pay?
o Do you need to offer credit?
• How will you attract potential customers to your business?
o Will they be concerned about how your shop looks?
o Can you attract them with advertising?
What’s the demand for a small engine repair shop?
Potential demand is another factor that will affect your decision about what type of
service to offer. You need to estimate not only how many customers you will have, but
also what those customers will want. Some parts of the state use small engines mostly
in outboard motors; others use them mostly in snow machines. Think about the types of
engine people are using, and what the potential for business is.
• What is the dominant use of small engines in your area?
• Is there another common use for small engines?
• What brands are most popular?
• How many small engines do most families have?
• What is your rough estimate of the number of small engines in your village?
• In nearby villages?
• Would people use a shop for annual maintenance?
• How many engines in your area need to be overhauled?
You don’t need exact numbers, but you should have a rough idea of how much work
there is in your area. Consider the different possibilities. Businesses in small
communities often need to offer a combination of services to survive. Coming up with
estimates for different types of services and different types of small engine repair
services will give you figures you can work with to develop your financial plan later.
One factor that will influence what services you provide is what repair services already
exist in your area. Many people in rural Alaska repair their own machines. Some villages
even provide a shop where people can rent space to repair their own machines.
Starting a Small Engine Repair Shop 15
Think about the alternatives your customers have, and why they might come to you
instead of using one of these alternatives.
• Why will people want to pay you to do this work?
• Is there someone else who repairs small engines in your area?
• What do you need to bring business to your shop?
o Spare parts that are hard to find?
o Training or a particular certification nobody else has?
o Ability to fix engines or be certified to fix engines without sending them
Find out as much as you can about the repair services already available in your area. You
might want to expand your research to your region, or at least consider where your local
market goes to receive services currently. Look at the local yellow pages. Check the
online Alaska Department of Commerce, Community and Economic Development
business registry. You might be surprised by what you don’t know. A quick survey of
small engine repair shops revealed that there are more than 10 small engine repair
shops in the Anchorage/Mat‐Su/Kenai region, and at least one shop in the towns of
Dillingham, Unalakleet, Glenallen, Sitka, Cordova, and Delta Junction.
Pricing and Willingness to Pay
Knowing what the potential demand is for services is one part of the equation. The
other part is knowing how much you can charge for your services. When you consider
what services you will offer, you should also think about how much it will cost to
provide those services. When you look at the competition, you can find out how much
the alternatives cost. You can also think about your own situation, or that of the average
community member, to estimate what they can afford to spend on small engine repair
services. Taking into consideration your customers’ ability to pay, your competitors’
fees, and the estimated demand for your services will give you an idea of how much
people are willing to spend on services, and how much you might be able to earn.
Following are some additional questions and considerations:
• How much do you want to charge per hour?
• How much do you want to charge per repair?
• What do the alternatives cost?
o Sending motors out for repairs?
o Buying new motors and equipment?
• How much money do people have to spend on repairs?
Starting a Small Engine Repair Shop 16
As with the other questions in this section, you don’t need exact answers to these
questions. But you should be able to make an educated guess. Honest answers will help
you see if starting a small engine repair shop makes any sense at all.
Back of the Envelope Calculation
Before going any further, make a quick calculation to see if your idea makes
sense. Take the number of potential customers and multiply it by the average
cost of a repair. This will give you a rough estimate of your potential revenues. The cost
of this service will vary, depending on the mechanic’s level of training, the availability of
parts, and the type of engine being repaired.
There are three villages in your with a total of 100 families. Each family has at least one
outboard, making your potential market 100 outboards. About one‐ third of the
outboards need some sort of repair. A typical repair takes five hour, and you charge $50
30 repairs x 5 hours/repair x $50/hour = $7,500
Your number of potential customers: _________________________
Average cost of repair: x_________________________
Estimated revenue: =_________________________
A quick estimate like this helps you determine if your revenues will be enough to
achieve your personal goals and/or if your revenues will support a full‐time, year‐round
Critical questions to answer in the market assessment and research step
Who is your target market?
Regional members Other _____________________
Lodge Owners Other _____________________
Starting a Small Engine Repair Shop 17
What is the estimated size of your market?
Who are your target customers? What are their demographics? (Profession, gender,
age, income level, etc.)
Why have you chosen this target market?
Why would your target customer use your small engine repair shop? Did you actually ask
some of your target market or are you just assuming?
Is your market seasonal? What are the primary months? How will you run the business
during the off‐season, if at all?
Have you already spoken to potential customers? How did they respond? Were they
interested in your proposed services?
Starting a Small Engine Repair Shop 18
What small engine repair shops already exist around your community? In the region?
Which of the existing shops are your direct competitors? Which are targeting the same
market niche? Why would a customer choose you over the competition?
What is currently offered by other small engine repair shops, and how will you compete?
How much do these small engine repair shops charge for their “average” services?
Answering the above questions and conducting an in‐depth assessment of your market
are essential. Market research gives you the information and data you need to identify
individual market segments. You might even consider conducting an informal or formal
market survey to get this critical information, before you establish your business.
Without enough market research, it will be impossible to know if there is any demand
for your small engine repair shop or not. The purpose of market research is to identify
your market and find out where that market is, so you can then develop strategies to
communicate with prospective customers in a way that convinces them to patronize
Market research will also give you important information about your competition that
will help you differentiate your small engine repair shop from theirs. To do this
successfully, you must have a good understanding of your competition, so you can
communicate the differences to your target market.
Once you feel you know your potential market, can identify your target niche, and have
a keen understanding of your competition, you are ready to move on to developing your
Starting a Small Engine Repair Shop 19
STEP 5 – DEVELOPING YOUR MARKETING AND
CUSTOMER SERVICE PLAN
Going into the small engine repair shop business does not mean, “build it and they will
come.” You still need to develop a plan for marketing your business. A critical
component of that plan will be providing first class services and attending to your
customers’ needs. Word‐of‐mouth is your most effective marketing strategy, but this
cannot happen without satisfied customers. Remember that his works both ways: if
your customers are disappointed or displeased, they will tell their family and friends
about that too.
In small rural Alaskan communities, you might need very little advertising to become
successful. “Advertising” might amount to nothing more than a sign placed outside your
place of business. However, you should consider some advertising to increase
awareness of your business, both in your own and surrounding communities. At a
minimum, you should post a notice with the business name, contact information, and
operating hours in local offices and stores, and on airport bulletin boards. You should
also contact community offices and stores in neighboring villages to promote your
It costs money to advertise, so choose your advertising methods carefully. Consider
which customers you are trying to attract, their interests and needs, and what type of
advertising will reach them most effectively.
Your advertisements and brochures often give potential customers their first impression
of your business. Make sure all of print material is written clearly and attractive in
appearance. Advertising is effective only if it reaches your intended audience.
One effective strategy to promote your business would be to contact the various
government agencies, Native groups, lodges, or construction contractors that do
business in your area, to tell them about your small engine repair shop and to find out if
they have a need for your services.
Public Relations and Promotions
As well as advertising, you should be good at sales – convincing the customer to come to
your small engine repair shop for repair services. Keep those customers coming back by
providing excellent service every time.
Starting a Small Engine Repair Shop 20
While the best way to keep your customers happy is to provide them with quality
service at a reasonable price, it also helps to make your shop attractive and convenient
for customers. Think of ways you can make customers prefer to bring their engines to
you. A little extra effort pays dividends later in the form of increased business.
• Would a well‐lit and clean shop or a good display of parts and goods make them
want to come to you?
• Do they feel comfortable asking you or your employee’s questions?
Small engine repair shops come in many different shapes and sizes, but all are very
service‐oriented. A small engine repair shop manager and staff are expected to be
friendly and helpful.
• First impressions are lasting impressions.
• A sign on the outside of the building should not be overrated, even in small
• City offices, stores, and airports should have fliers and knowledge about your
business, so people passing through town also know it exists.
Starting a Small Engine Repair Shop 21
STEP 6 – DEVELOPING YOUR ORGANIZATIONAL PLAN
Your organizational plan details the ownership, management, and staffing of your small
engine repair shop. First, you need to decide what the legal structure of your business
will be. Next, you should make a list of all your business activities and decide who will do
what. Going through this process helps you identify what skills you already have and
what necessary skills are lacking. Finally, you will explain how you are going to address
any gaps in skills.
Ownership Considerations (Legal Structure)
Choosing the appropriate legal structure for your business is an important planning
decision. You can operate as a sole proprietorship, a partnership, a limited liability
company, or a corporation. The easiest way to start a business in Alaska is to get a
business license and start taking in engines to repair. This type of business is called a
sole proprietorship. It has one owner and one person who is responsible for everything
the business does.
However, you might want to take on another person as a partner. You could also find
you have enough work to employ four or five people, and it would be better to form
your business as a corporation. Partnerships, limited liability companies (LLCs), and
corporations each have their own advantages and disadvantages. If you think you
should set up a partnership, LLC, or corporation, talk to a counselor at the Alaska Small
Business Development Center, or consult a lawyer and/or certified public accountant.
It is tempting to just organize, but there are clear pros and cons to each form of
organization, and you should familiarize yourself with the options. You will need to
conduct your own research on legal structure, and there are plenty of resource guides
and classes to assist you in this determination. In the end, it is probably best to ask a
lawyer or accountant for help. This is an important step, and you should lay the
foundation for your business with as much care as you plan your business activities.
As the manager, you will plan, organize, direct, control, evaluate and implement
ongoing activities of your small engine repair shop. Most businesses of this kind in rural
Alaska are too small to support a paid manager and still provide income to an owner.
The owner often performs all the management functions, as well as many of the
employee functions, until the Small Engine Repair Shop becomes profitable.
Starting a Small Engine Repair Shop 22
Specific responsibilities of the manager include:
• Financial Accounting – Ensuring funds are available to operate your small engine
repair shop. Activities include developing systems to track revenue and expense
items (cash flow statement), evaluating the information, and developing a
• Marketing – Ensuring customers come to your small engine repair shop.
Activities include attracting customers to your business, and providing quality
mechanical services, so that these customers bring you repeat business.
• Facility Maintenance – Ensuring the shop (interior and exterior) is properly
maintained. It is particularly important to address all health, safety, regulatory
and licensing considerations.
Building your Small Engine Repair Shop Team
The first step in looking for someone to hire is to decide what exactly you want them to
do. You don’t need to develop a formal job description, but you do need to outline
clearly all the duties and responsibilities of the person in that position.
Next, you will need to decide how much you are willing to pay the position. Calculating
the wage rate is a combination of what others are paying for similar positions, and what
your financial planning says you can afford.
Hiring employees in rural Alaska can be difficult. If you are in a small community, you
might be looking at a very small pool of applicants who need training in the skills
necessary for a small engine repair shop worker. If you have lived in the community for
any length of time, you might also face the further complication of hiring your friends
and/or relatives as employees. All these obstacles can be difficult to navigate. Hopefully,
the recommendations below will smooth this process.
• Do not underestimate training. If you hire somebody who does not have the
necessary skill set for a position, do not assume they will pick it up as they go.
Plan to spend extra time and money to teach your employees personally what
they need to know, or budget for outside help, online classes, or computer
software to help them in acquire the skills they need.
• It might be worth paying more for somebody who is responsible or who already
has the skills you require. An irresponsible or ill‐equipped employee can slow
down a business’s operation, and or even affect its reputation. This can end up
costing much more than paying a slightly higher wage for a better employee.
Starting a Small Engine Repair Shop 23
• Perform a criminal background check on potential employees. This is a cheap
and convenient process that allows you to feel safe in hiring employees and to
protect yourself from unknown threats. Two organizations that conduct criminal
background checks are:
o The Alaska Department of Public Safety
o Motznik Information Services
• If you hire friends or family members, make sure you discuss expectations with
them. Your employees need to understand that they must show up for work on
time, obey the rules of the business, and act professionally – or they will be fired,
just like any other employee. This can lead to complications and strife between
family and friends. If you do not believe your friend or family member will be
able to follow the set rules or that you will have trouble enforcing them, do not
Ensuring Mechanical Skills and Aptitude
If you are not working on machines under warranty, then no specific training is needed.
However, to succeed in this business, you should have extensive knowledge about
machines and how to repair them. You should also have some knowledge of business,
customer relations, and environmental issues. If you want your business to be a certified
provider to machines still under warranty, you must take special mechanical training
courses to become a certified mechanic. You will need to contact specific manufactures
to determine their specific training and certification requirements.
Mechanical training is available at the King Career Center in Anchorage, the
Northwestern Alaska Career and Technical Center (NACTECT) in Nome, or the King
Salmon Vocational Technical Center. You can also learn a great deal through an
apprenticeship with ATV and snowmachine dealers, located throughout Alaska.
While you may initially feel that no specific training is necessary or needed, in most
cases some training is beneficial. Running your small engine repair shop will require
some basic knowledge of the following:
• Bookkeeping: If you, as the business owner, are not comfortable keeping the
books or using bookkeeping software, you should consider hiring a company to
keep the books and file your taxes.
Starting a Small Engine Repair Shop 24
• People skills: As the owner, you will need to display a positive attitude towards
customers at all times, especially when things do not go well.
Even the smallest business needs a system of record keeping. You can find general
business assistance at many different small business assistance programs like the Small
Business Administration (SBA) and the Small Business Development Center (SBDC). See
page 69 for Additional Resources. These organizations provide information to help you
organize your business records, so you can keep track of your income, expenses, and tax
reporting. If you don’t want to do this yourself, you can submit your records, check
stubs, repair orders and bank records to an accountant or bookkeeper monthly or
quarterly, and have them prepare your accounts and tax returns. But it is advisable to
have a working knowledge of accounting, so you can monitor how your business is doing
and understand how you could make if more profitable.
Remember to consider your own skills when weighing management and training needs.
Do not underestimate the value of investing in your own education. It might be worth
flying to Anchorage or even to the lower‐48 to attend a mechanical certification
program, if it will differentiate your services from your competitors’. If you lack a certain
skill set, you may need to hire somebody who possesses it.
Critical questions to answer in this step include:
What tasks will need to be completed on a daily basis?
How many staff do you plan to employ? What will you pay them?
Starting a Small Engine Repair Shop 25
Are your staffed positions seasonal, full‐time, part‐time, etc.?
What skills do your employees need to be successful at their jobs?
How will you train employees and ensure that they have needed skills?
What professional relationships have you established? (Lawyer, accountant)
Starting a Small Engine Repair Shop 26
STEP 7 – DEVELOPING YOUR FINANCIAL PLAN
A financial management plan is an important tool that helps you monitor
the financial performance of your business and plan for its growth. This section guides
you through the process of determining whether or not your small engine repair shop
will be profitable.
As a first step, you need a firm grasp of your projected start‐up costs. Next, you will
develop your annual budget by estimating your revenue and expenses. You will then be
able to calculate your projected profits. Use the worksheets on pages 62 to 68 to
develop your financial projections. To prepare financial estimates, you need to make
some basic planning assumptions. Assumptions are no more than educated guesses
about your average cost, number of customers, and operating expenses.
Following is a summary of key factors and considerations involved in developing your
Start‐up costs are usually one‐time expenses necessary to open your business. Some,
such as the purchase or remodel of a facility, are significant. Others, such as equipment
purchase, utility deposits, down payments, and various one‐time fees, are minor.
Start‐up costs will vary according to your facility, but common start‐up expenses for this
type of business include:
• State of Alaska business license ($100 per year)
• Tools and shop equipment
• Facility lease and/or purchase, and/or renovation.
Your could finance your start‐up costs with a small loan paid back over a term of five to
20 years but, due to the difficulty of micro‐lending in rural Alaska, do not assume such a
loan will be readily available. Many small business owners finance their start‐up with
personal savings. If you do borrow money to start up your small engine repair shop, it
might take several years to repay the loan through your business profits.
Many start‐up costs can be turned into fixed costs through loans, or if you rent instead
of buy. If you lease equipment, it becomes a fixed cost. If you can rent your business
space, only the security deposit would be a start‐up cost – your rent would be a monthly
fixed cost. Renting might be more expensive in the end, but if your business were to fail,
you would not have spent or borrowed a large amount of money to buy a building and
Starting a Small Engine Repair Shop 27
The following example of start‐up costs for a small engine repair shop in a
community of 600 people is based on interviews with insurance agents, business
owners, and utility companies. In this example, the owner is buying a $100,000
building. He is putting $20,000 down, and has a mortgage for the rest. He wants
to spend $500 to advertise the grand opening, and is paying 30 percent of the annual
cost of insurance up front.
Sample Start‐Up Costs for a Small Engine Repair Shop
Business license $100
Miscellaneous permits $100
Insurance down payment $750
Building /occupancy $20,000
Tools & equipment (below) $10,000
Parts inventory $4,000
Utilities down payment $500
Total : $38,950
Tools, Equipment, and Inventory
Most minor repairs and maintenance can be accomplished with ordinary hand and
bench tools. However, some manufacturers have produced specialized tools for their
repairs. Some of these special diagnostic tools include volt, compression, and electrical
testers. For a general idea of tools and equipment you might need, see the table on the
Depending on the type of service you are offering, you might also think about acquiring
a trailer or towing equipment, so you can move damaged gear to your shop. To work on
larger engines you will need an engine lifter to be efficient.
Starting a Small Engine Repair Shop 28
Equipment and supplies can be bought new off the internet from places like J.C.
Whitney, Eagle Equipment, or The Tool Warehouse. You might also be able to purchase
them from a recycling program. Many rural communities have set up recycling programs
with assistance from the Rural Alaska Community Action Program, Inc. (RurAL CAP). Call
the Alaska Materials Exchange at 1‐800‐510‐2332 for more information on this program.
Tools & Equipment Cost
Bearing presser & oil filter crusher $300
Metric tools $500
Bench tools $500
Tester tools $350
Air wrenches, socket, ratchet $300
Air compressor $800
Rim breakdown unit $500
Transmission puller and case splitter $500
Amp/volt meters $150
Jack stands $100
Parts for Marine Motor
Oil burner $3,000 Drive belts
Parts cleaner table $150 Water pumps
Aerosol can recycling system $700 Thermostats
Battery charger $300 Propellers (outboards)
Total $10,000 Impellers (Jet boats)
A typical small operation with one or two mechanics will spend Gear case oil
between $4,000 and $5,000 a year on parts. Some dealers Motor oil
offer discounts for large parts orders. For example, Marita Sea Two stroke oil
& Ski in Anchorage gives a 10 percent discount to customers Spark plugs
that spend $1,000 or more annually at their store. When you Other wear type parts
are calculating how much parts will cost, make sure you talk to
your suppliers about available discounts. The two parts lists Parts for ATVs and
above show the parts mechanics in rural communities order Snow Machines
most commonly for land and water vehicles. Belts
In addition to tools, you will need an oil burner, a battery
Nuts & bolts
disposal system, and an aerosol can puncturing and draining Idler wheels
device to comply with the Environmental Protection Agency Suspension parts
(EPA) waste disposal rules. You can use an oil burner to Spark plugs
produce heat (lowering cost of utilities) for the shop, as well as Brake pads & discs
to comply with hazardous waste regulations. Other wear type parts
Starting a Small Engine Repair Shop 29
The type of machines your potential customers will need serviced will vary according to
which region of Alaska you are in, and how you decide to structure your business. For
example, you will not need to work on snow machines during the summer, if you live in
Southeast Alaska; similarly, you will not work on boats during the winter, if you are in
Interior Alaska. This means your inventory will vary throughout the year. Before
purchasing replacement parts, you should find out what brands and types of machines
are most common in your community, but you should always keep maintenance parts
Answer the following questions to determine the amount of start‐up capital
you will need to open your small engine repair shop.
How much money do you have saved to towards your business start‐up?
How much money will you need for start‐up and working capital?
To project your revenues, you need to estimate how many customers will use
your services and how much the average customer will spend. To estimate
customer expenditures, review the rates of other small engine repair shops in
Simple revenue estimates like the sample in the table below assume you will get paid as
soon as the work is done, and that you do not take down payments or let customers pay
through installments. It also assumes you are able to sell all the rebuilt engines every
month. In the sample, 20 percent is added to the cost of the parts sold, and labor is
charged at $50 an hour. Why is there a difference between the cost of labor in our
variable costs and the cost of labor for our revenue? In our example the owner is doing
all the repair work. He needs to make $20 an hour. His labor fee also needs to cover all
fixed costs. You will need to add your labor rate, fixed cost rate and profit rate in order
to cover your costs and make some profit. Additionally, you will need to manage costs
and fees to still remain competitive. Making sure you stay competitive is one of the
reasons you start off by studying the market, your competition, and your customers’
Starting a Small Engine Repair Shop 30
Sample Revenue Estimate
Repair jobs $9,310
Sales of parts $1,200
Sale of used/rebuilt engines $2,500
To manage your finances effectively and plan for a sound and realistic budget,
you will need to estimate your operational costs. Again, it is important to list
your assumptions so you can track what you based your costs on. Costs typically
include both fixed and variable costs.
Fixed costs are fees you pay yearly, with or without customers. These include minimum
staffing, managers, rent, utilities, interest, and depreciation. Other fixed costs might be
professional association fees and loan payments (if you have taken out a loan).
If you hire any staff, you must include staffing or labor costs, such as (FICA Tax,
Workmen’s Compensation, Federal and State Unemployment, Medical Insurance and
any Vacation or Holiday Pay. These expenses can amount to between 15 and 20 percent
of your total labor costs.
Variable costs are the costs you incur for each job you do, ideally you charge each to a
specific job. You can calculate these per job, but you must eventually tie them into a
timeframe – per week, per month or per year. This example uses a monthly calculation.
In this example, the shop repairs 35 engines a month. Repairs are estimated to take an
average of 4 hours each. The owner wants to charge at least $20 per hour for his work.
Each repair will require $50 in parts, and $5 in oil, lube and other materials.
The shop in this example also sells – an estimated $1,000 worth of parts a month. It also
buys old engines and reconditions them for resale. In the example, the shop rebuilds 5
old engines a month. They cost $200 to buy, take 4 hours to repair, and need $50 of
parts and $5 of materials each.
Starting a Small Engine Repair Shop 31
Sample Variable Costs
DESCRIPTION Cost per month
Purchase used engines $1,000
What factors contribute to your variable costs and how can you manage?
Successful businesses are always looking for ways to increase profits. There are
three basic ways to do this: increase what you charge, decrease your expenses,
or increase the volume of work. One advantage of keeping good records is that
it allows the business owner to see the best way to increase profits. You might
be able to make more money buying, rebuilding and selling small engines than by
charging for time and parts for repairs. You may be able to cut parts costs by ordering in
quantity and negotiating better prices with distributors. Maintaining good records of
your income and expenses is critical.
• What type of work will pay you the best for your time?
o Straight repair work?
o Buying and selling used engines?
o Selling parts and accessories?
• Are there ways that you can negotiate better prices?
o From distributors?
o From shipping companies?
Starting a Small Engine Repair Shop 32
There are several calculations you can make with the figures from your financial
statements to help you run your business more efficiently. For example, it would be nice
to know where the sample business makes the most profit for each dollar spent – what
the profit margin is on repairs, selling parts and selling rebuilt engines. The following
example will help you in identifying profit areas:
1. You know the margin on parts, because 20 percent was added to the cost. For
every dollar spent on parts, 20 cents is gained when they are sold. You can
calculate the profit margin on repairs by dividing the profit for repairs by the
price charged for repairs. If each repair requires $80 in labor ($20per hour x 4
hours per repair), $50 in parts, and $5 in materials (oil, lubricants etc.), it comes
to $135 per repair.
2. The average charge of each repair is estimated at $266. This includes $200 for
labor ($50 per hours x 4 hours per repair) plus $60 for parts ($50 plus 20%) and
$6 for materials ($5 plus 20%). For each repair, you would make $131 ($266
minus $135). If you divide $131 by $266, you get 0.49 or 49 percent profit
margin. As you assumed, repairs are bringing more profit than parts are.
3. In this example, each engine you rebuild costs you $405. This includes the $200
you pay for the engine, and $80 in labor, $50 in parts and $5 in materials to
rebuild them. You sell the rebuilt engines for $500, making a profit on each
engine of $95. When you divide $95 by $500, you get 0.19 or 19 percent margin.
The rebuilt engines, therefore, make you the least amount per sale.
These calculations help you identify, that you want to spend as much time as possible
repairing engines in order to maximize profitability. It also tells you that you should
perhaps review how much you are charging for parts or rebuilt engines to improve your
profit margin in those areas. Some businesses try to earn the same margin on all of their
products and services. The following break‐even example will show you one reason why
this makes sense.
Estimating Break‐Even Point
A tool often used in business planning is called a “break‐even analysis”. A break‐even
analysis tells you how many sales you need to make to cover all your costs (fixed and
variable). This is your “break‐even point.”
To calculate a break‐even point, take the following simple steps:
Starting a Small Engine Repair Shop 33
1. Determine the average sales price of your product or service.
2. Calculate the total variable costs and subtract these costs from the average sales
price. The remainder is called the “unit contribution” or amount you have
available to cover fixed costs.
3. Total your fixed costs (insurance, licensing, utilities), also known as overhead.
4. Divide your total fixed costs by your “unit contribution” to determine your
A break‐even calculation is useful in several ways. When you are starting your
business, it gives you a minimum target. If you can’t realistically hit this target,
you had better reconsider your business. If you have been in business for a
while, you can use a break‐even analysis to determine how additional sales
would support increased salaries, medical benefits, purchase of equipment, or
expansion of your business to the next level.
Break‐Even Analysis Example
The extra money you make repairing engines, and selling parts and reconditioned
engines, has to cover all your fixed costs. In the example, you had $4,638 in fixed costs
every month. A break‐even analysis will let you know how much business you need to
bring in to cover these costs. It can help you see if you are going to be short, which gives
you more time to figure out what to do.
To calculate the break‐even point you need to know the average profit margin. Since
you have three different margins, you need to weight them to get an average. If you
look at the cash flow analysis, you can figure out what percentage of your revenue
comes from repairs, parts, and rebuilt engines. You do this by taking the revenue you
earned from each of these activities over six months, and dividing it by your total
revenue for those six months.
1. With repairs you earned $46,550, and your total revenue was $65,050. If you
divide $46,550 by $65,050, you get 0.7156. So, repairs made up about 72
percent of your business.
2. You earned $6,000 by selling parts. If you divide $6,000 by $65,050, you get
0.0922. So, 9.2 percent of your revenue came from parts.
3. You earned $12,500 by selling engines. If you divide $12,500 by $65,050, you get
0.1922. Engines accounted for 19 percent of your revenue.
Starting a Small Engine Repair Shop 34
Now you have these percentages, you can calculate your average profit margin. You do
this by multiplying the percentage of revenue for each of your revenue sources by its
profit margin, and adding them all up.
Repairs 72% business x 49% profit margin = 0.35
Parts 9% business x 20% profit margin = 0.018
Engine rebuilds 19% business x 19% profit margin = 0.036_
Average profit margin = 0.4065 or 41%.
To arrive at your break‐even number, divide your fixed costs by your average profit
margin. This gives you the amount of revenue you need to generate each month to
cover all your fixed costs.
$4,638 = $11,313
Even if this number is based on rough estimates, it still gives you a target. If you get
halfway through a month and have only done $2,000 worth of business, you had better
start coming up with ways to cut some costs or other ways to earn money, or you will
soon be out of business.
These are just some examples of ways to calculate and use financial data. Hopefully,
they give you an idea of how useful a bit of math can be in running your business more
Answer the following questions to prepare yourself for making financial
How many customers do you have the ability to serve in your Small Engine Repair Shop?
If you are a new business, how many sales do you need to hit break‐even point, and how
many sales do you need to reach your desired profit level?
Starting a Small Engine Repair Shop 35
A primary indicator of the overall health of your business is its financial status. You will
need to develop the skills necessary to monitor and track your fiscal progress as a
regular part of running your small engine repair shop.
There is a wide range of computer software packages available to assist you in
tracking your business’s financial position. If you are unfamiliar or
uncomfortable with these systems, you might want to contract with an
accountant to set up your accounting systems and train you in how to use them.
Ultimately, even if you use an accountant or bookkeeper you need to be able to read
the statements provided to you. Additionally, regardless of the system you use, you
must strive to keep your business records current.
The primary financial statements that you will need to understand and use include:
• Profit and loss statement – This income statement lets you know how much your
business is making or losing over a specific period of time (monthly, quarterly,
yearly). Subtract expenses from revenues to arrive at a net profit or loss.
• Balance sheet – A financial “snapshot” of your business. Summarizes your assets,
liabilities, and ownership equity on a specific date.
• Cash‐flow statement – This statement of cash flows shows the inflows and
outflows of financial activity for a specified period (often monthly or quarterly).
It also tells you if you are generating enough revenue to cover your expenses
during given periods.
Understanding and monitoring your cash flow will be of critical importance. All too often
small business owners take in revenue without fully accounting for the expenses and
costs that must be covered. Net cash flow is the difference between incoming cash and
outgoing cash. Start‐up costs and unforeseen expenses can quickly gobble up your cash
reserves. Preparing cash flow reports helps you as a business owner to plan for payment
of your bills.
Additionally, all businesses have sales cycles based on the seasons, community events,
and the days of the week. A small engine repair shop is no different. Your financial
projections should take into account any events or known activities that will positively
or negatively impact your sales or expenses.
Let’s look at some example financial statements specific to a small engine repair shop:
Starting a Small Engine Repair Shop 36
An income statement shows how well your business did over a given period of time. The
following page shows an income statement for the first year of your hypothetical repair
shop. To keep it simple, just take your monthly figures and multiply them by twelve.
Then take you total sales for the period and subtract your variable costs for the same
period. The result is your gross profit. Finally, you add up your fixed costs for the whole
year and subtract them from your gross profit.
Your income statement shows you if you are going to make money at the end of the
year. Of course, there are some additional expenses this does not show, such as taxes
and saving money for expansion. But it does show you whether or not you are making
money. In the example, your shop will make $11,660.
Sample Income Statement
Total Sales (Sales for the year) $156,120
Cost of Sales (variable costs for the year) $88,800
Gross Profit (total sales ‐ cost of sales) $67,320
Salaries/Wages (bookkeeper and admin) $24,000
Repairs/ Maintenance (for building) $6,000
Miscellaneous Expenses $6,000
Total Expenses $55,660
Net Profit Before Taxes
(Gross profit ‐ Total Expenses)
An income statement gives you a year‐at‐a‐glance picture of your business. It does not
tell you what is happening during the year or where your money is going. In the real
world, revenue and expenses do not flow evenly every month. Following is a tool for
predicting your cash flow.
Starting a Small Engine Repair Shop 37
A cash flow statement provides you with a more detailed picture over time. It also
shows expenses and revenue for a given period of time (typically half a year or a year),
breaking them down into shorter increments of time, usually by month. On the
following page you will see an example of a six‐month cash flow statement that shows
the expenses and revenue for each month.
The first month includes your start‐up costs. If you assume your shop will be up and
running in a month, you would put all the start‐up costs in month one. This example also
shows you are repairing 35 engines a month and selling $1,000 in parts. You purchased
$4,000 in parts at the start‐up, so you sold parts for two months before you needed to
buy more parts.
The example also shows you did not sell all the rebuilt engines every month. You sold
only two of the five motors in the first two months. But, by the end of six months you
were selling eight motors a month: five you had rebuilt that month, plus three you had
This example shows how useful a cash flow statement can be. You can see what
happens when you don’t sell all the engines anticipated. In those months, you have a lot
less money available to cover costs. An income statement will not show this, and may
lead you to believe, falsely, that you have enough revenue to run your business. It
shows only the totals at the end of the year, not that you might have a couple of lean
Looking at the cash flow statement, you can see it makes sense to have some
extra cash on hand for those first couple of months, in case you don’t sell as
many rebuilt engines as you projected. It also shows your progress toward
paying off your start‐up costs. In six months, your shop paid off $6,858 of the
$39,050 needed to start up. This $39,050 would have to come from either your savings
or an investor. The cash flow statement also helps you calculate how long it will take to
pay off your investment.
Starting a Small Engine Repair Shop 38
SAMPLE SIX‐MONTH CASH
Month 1 2 3 4 5 6 Total
Start‐Up and Fixed Costs
Salaries/Wages $2,000 $2,000 $2,000 $2,000 $2,000 $10,000
Business License (2 years) $200 $0 $0 $0 $0 $0 $200
Miscellaneous Permits $100 $0 $0 $0 $0 $0 $100
Insurance Down Payment $750 $208 $208 $208 $208 $208 $1,792
Building /Occupancy $20,000 $1,000 $1,000 $1,000 $1,000 $1,000 $25,000
Repairs/ Maintenance $500 $500 $500 $500 $500 $2,500
Training $3,000 $0 $0 $0 $0 $0 $3,000
Tools & Equipment $10,000 $0 $0 $0 $0 $0 $10,000
Advertising $500 $200 $200 $200 $200 $200 $1,500
Utilities Down Payment $500 $230 $230 $230 $230 $230 $1,650
Miscellaneous Expenses $0 $500 $500 $500 $500 $500 $2,500
Labor $0 $2,800 $2,800 $2,800 $2,800 $2,800 $14,000
Parts $0 $1,750 $1,750 $1,750 $1,750 $1,750 $8,750
Materials $0 $175 $175 $175 $175 $175 $875
Parts $4,000 $0 $0 $1,000 $1,000 $1,000 $7,000
Purchase used engines $0 $1,000 $1,000 $1,000 $1,000 $1,000 $5,000
Labor $0 $400 $400 $400 $400 $400 $2,000
Parts $0 $250 $250 $250 $250 $250 $1,250
Materials $0 $25 $25 $25 $25 $25 $125
Total Costs $39,050 $11,038 $11,038 $12,038 $12,038 $12,038 $97,242
Repair jobs $0 $9,310 $9,310 $9,310 $9,310 $9,310 $46,550
Sales of parts $0 $1,200 $1,200 $1,200 $1,200 $1,200 $6,000
Sale of used/rebuilt engines $0 $1,000 $1,000 $2,500 $4,000 $4,000 $12,500
Used engines sold 2 2 5 8 8
Total Revenue $0 $11,510 $11,510 $13,010 $14,510 $14,510 $65,050
Profit/(Loss ) ($39,050) $472 $472 $972 $2,472 $2,472 ($32,192)
Starting a Small Engine Repair Shop 39
The balance statement is another snapshot of your business that shows what it is worth,
what it owes, and who it owes money to. The following snapshot was taken at the end
of month 4 of operation. It also shows you how part of the value of the business is tied
up in the unsold, rebuilt engines.
A balance sheet has to balance. You start by listing all the things the business owns – in
other words, its assets. In this example, the business owns its building, equipment, parts
inventory (you had $4,000 to start but have sold $2,000 of them). It also owns an
inventory of unsold rebuilt motors. You rebuilt ten (five a month for two months) but
have only sold four. So, there are six in stock, which you have invested $2,430. Your
total assets are $114,430.
Next you must show what the business owes – its liabilities. You still owe $80,000 for
the mortgage on your building. You have not taken out any loans, but your liabilities
have to equal your assets. Whatever the business does not owe to outsiders, it must
owe to its owners. In this case, you the owner put up most of the start up money, so the
business really owes you. If you subtract the mortgage from the assets (what the
business owes from what it is worth), you have $34,430. This is the part of the total
value of the business that you own outright – your owner’s equity.
Sample Balance Sheet
Owed by customers $0
Rebuilt Engines $2,430
Total Assets $114,430
Business loans $0
Owner Equity $34,430
Total Liabilities $114,430
Why is a balance sheet useful? If you compare balance sheets from one year to the next,
you can see how the business is growing. A balance sheet also lets you see where the
value of the business is. This example shows that you have more than $4,000 tied up in
Starting a Small Engine Repair Shop 40
unsold engines and parts. You should keep an eye on that, to make sure you don’t end
up with items that cannot be sold.
Bankers or lenders want to see a balance sheet to know who else the business owes
money to, and to make sure there is enough owner equity to cover any loan requests.
Your income statement, cash flow statement, and balance sheet provide other useful
information too. Use them as tools to manage your business. Consider running the
projections you develop by someone already in the small engine repair business, to see
if they have advice or agree with your assumptions.
The income and cash flow statements you develop before your start your business are
based on guesswork, but provide good benchmarks for how your business is doing. After
six months to a year of operation, you will be able to compare your actual income, cash
flow, and balance sheet to your estimates. After you have been in business for two
years, you can compare your statements from one year to the next to monitor how well
your business is growing. You financial statements can also reveal potential problems. In
the example, you started to accumulate unsold rebuilt engines. If this had continued
and you had not being paying attention you could have sunk a lot of money into engines
that were not earning you any money.
Starting a Small Engine Repair Shop 41
Machines with small engines will be used in Alaska into the foreseeable future. The
cultural and historical tradition of hunting and fishing, combined with Alaska’s
geography (remote areas covered with permafrost) make snowmachines, ATVs, and
boats a necessity for many Alaskans. The state of Alaska, Native corporations, and
various other entities offer a variety of grants that could potentially help you cut your
business start‐up costs, but you first must prove that you have a viable business.
To improve your businesses profitability you can see ways to reduce business expenses
by further researching and comparing suppliers, buildings, and accounting practices, or
networking with other companies or villages. You can contact many different parts and
equipment suppliers to discover who would give the best discounts on parts and
supplies and to learn who would be willing to provide technical assistance when you
need it. When you first begin, you can call various real‐estate agents to find out whether
it is cheaper to rent or purchase a building. You can cut costs substantially by doing your
own accounting, but make sure you have the time and knowledge to do this properly.
A variety of classes are available at little to no cost through the Small Business
Development Center, the Small Business Administration, Alaska Village Initiatives, and
other governmental or Native agencies. Networking is very important for small
businesses, because, by networking with surrounding communities, you gain a much
larger market to support your business and potentially learn from the experience of
If you contact Anchorage or national dealerships, you may find a way to obtain
discounts on parts and technical advice on repairs. When working with the dealerships,
make sure they understand the importance of these machines to rural Alaska; if a
certain type of machine is more readily available than others, the residents of that area
will tend to buy that type of machine out of convenience. You will receive a great deal of
advice from speaking with local Native corporations, village councils, city councils,
Native associations, and environmental compliance offices.
Starting a Small Engine Repair Shop 42
Starting a Small Engine Repair Shop 43
Starting a Small Engine Repair Shop 44
Starting a Small Engine Repair Shop 45
Location Evaluation Worksheet
This worksheet should help you determine what type of small engine repair shop might
be successful in your community.
1. What is the population of your community? _________________________________
2. Are you located on the road system? Yes _____ No _____
3. If yes, how far are you from the nearest regional center, or urban area? ___________
4. What lodging facilities exist in your community that might want mechanical services?
• Hotels ____________________________________________________________
• Motels ____________________________________________________________
• Roadhouses _______________________________________________________
• Bed & Breakfasts ___________________________________________________
5. How many government projects are currently active within your community that
might require mechanical services?
• Short‐term ________________________________________________________
• Long‐term _________________________________________________________
6. Are you a transportation or service hub for surrounding communities? Which
communities? Are there opportunities to provide mechanical services to more than one
□ Yes __________________________________________________________
7. Does your community have any special taxes or restrictions on small engine repair
□ Yes __________________________________________________________
Starting a Small Engine Repair Shop 46
Guidelines for Conditionally Exempt Small Quantity Generators
Because waste oil can be damaging to the environment, its disposal is strictly regulated.
As stated above, the Federal Resource Conservation and Recovery Act (RCRA) regulate
how waste oil produced by businesses must be stored, handled, transported, and
disposed of. If your business produces less then 100 kg (220 pounds) per month, it is
considered a conditionally‐exempt‐small‐quantity generator (CESQG), and you will not
need to worry about so many regulations. Most small engine repair shops in rural
Alaska will be CESQGs because of their small scale and limited market. It is important
for you to comply with the work practices summarized below.
• Identify all hazardous waste at the business site.
• Generate less than 220 pounds of hazardous waste per month, so you can
remain a CESQGs. Never accumulate more than 2,200 pounds of hazardous
waste at any one time.
• Properly store and label waste. Call the Compliance Assistance Office at 1‐800‐
510‐2332 for more information.
• Try to reduce, reuse, recycle, or treat your waste instead of disposing of it. If you
must dispose of it, make sure it ultimately goes to a permitted hazardous waste
management facility (also known as a treatment, storage, and disposal facility).
• If you don't recycle or treat it yourself, carefully choose a vendor to recycle,
treat, or dispose of your waste.
• Arrange for a vendor to transport your waste. If the vendor does not provide
this service, CESQGs may transport their own waste, although this means you
would still need to comply with the Department of Transportation regulations.
• Train workers to respond to emergencies.
• Keep all records related to hazardous waste, including receipts, bills of lading,
manifests, and logs. You need to be able to show the amounts and types of
waste you deal with, as well as the date they were handled and where they were
• Comply with other regulations pertaining to hazardous materials and wastes.
These include health and safety, fire code, air pollution, surface and ground
water, sanitary sewer, and solid waste regulations.
Below is a copy of the guidelines you need for follow for the handling of used oil,
aerosol cans, batteries, and oil filters.
Starting a Small Engine Repair Shop 47
GUIDELINES CONCERNING USED OIL FOR CESQGS
• Label all containers and tanks as “Used Oil”.
• Keep containers and tanks in good condition. Don't allow tanks to rust, leak, or
deteriorate. Fix structural defects immediately.
• Never store used oil in anything other than tanks and storage containers. So
long as they are labeled and in good condition, tanks and containers storing used
oil do not need to be RCRA permitted. You are prohibited from storing used oil
in lagoons, pits, or surface impoundments that are not permitted under RCRA.
• Take steps to prevent leaks and spills. Keep machinery, equipment containers,
and tanks in good working condition and be careful when transferring used oil.
Have sorbent materials available on site.
• If a spill or leak occurs, stop the oil from flowing at the source. If a leak from a
container or tank can't be stopped, put the oil in another holding container or
• Contain spilled oil. For example, containment can be accomplished by erecting
sorbent berms or by spreading a sorbent over the oil and surrounding area.
• Clean up the oil and recycle the used oil, as you would have before it was spilled.
If recycling is not possible, you first must make sure the used oil is not a
hazardous waste and dispose of it appropriately. All used cleanup materials,
from rags to sorbent booms, that contain free‐flowing used oil also must be
handled according to the used oil management standards. Remember that all
leaked and spilled oil collected during cleanup must be handled as used oil. If
you are a used oil handler, you should become familiar with these cleanup
methods. They may also be part of a spill response action plan.
• Remove, repair, or replace the defective tank or container immediately.
• If not recycling on site, some requirements must be complied with before being
transported. Waste must be packaged, labeled, and marked in accordance with
applicable DOT requirements. DOT hazardous materials information line at 202‐
• Hazardous waste sent off site for handling may only be sent to a hazardous
waste Toxic Substance Disposal Facility (TSDF) or recycling facility unless
otherwise exempt CESQGs which treats waste on site.
• Used oil off site‐ To be disposed of by TSDF or recycling facility.
• Used oil on site‐ Waste oil burners, boilers, space heaters, or furnaces.
Starting a Small Engine Repair Shop 48
GUIDELINES CONCERNING AEROSOL CANS FOR CONDITIONALLY EXEMPT
SMALL QUANTITY GENERATORS
• When done using, puncture with puncturing device and drain.
• Collect empty aerosol cans in a five gallon container (just aerosol
• Empty cans are considered solid waste and can be disposed of in the
• Fluids must be kept separate from other waste and manifested.
GUIDELINES CONCERNING BATTERIES FOR CONDITIONALLY EXEMPT
SMALL QUANTITY GENERATORS
• Used Batteries need to be placed in a impermeable container and
• Container needs to be marked "Used Batteries".
• Can rejuvenate battery's by flushing them, but then there would be a
concern of lead and acid in the wastewater produced.
• Fly batteries to Anchorage to recycling center, or make arrangements
to exchange used for new batteries with Napa in Bethel.
• Contact Native Corporations and Environmental Specialist to see if
there is a battery pick up system in place. For example Yutana Barge
lines has made an arrangement to pick up used batteries and used oil
for recycling for free.
Starting a Small Engine Repair Shop 49
GUIDELINES CONCERNING USED OIL FILTERS FOR CONDITIONALLY EXEMPT
SMALL QUANTITY GENERATORS
• Completely drain filters and make sure they are empty before putting
the filters in the trash or recycling bin.
• Filters must be drained using one of the hot draining methods
approved by the EPA
• Filters can be recycled as scrap metal
• Facility may contract with a service such as Safety Kleen, which takes
• Filters may be disposed in the dumpster as trash if completely
• Oil may be recycled or shipped out for disposal or recycling.
Starting a Small Engine Repair Shop 50
Occupational Safety & Health in the Automotive Repair Business
THE FOUR POINT WORKPLACE PROGRAM
A commitment to health and safety in the workplace is the only means of preventing
accidents and injuries before they happen. Accidents and injuries not only inflict turmoil
and pain into the lives of your employees, but may hinder the operations of your
business. Losing a key employee to an injury, or a portion of your shop to a fire are a
small businesses worst nightmares.
A commitment to safety and health in the workplace has been proven to be profitable
by many businesses, small and large. An effective health and safety program means
fewer worker compensation claims, a more productive and healthy workforce, and in
some cases reduced prices for insurance coverage. OSHA also allows a 25% fine
reduction for facilities with "effective" health and safety programs.
OSHA advocates a four‐point approach to developing a health and safety program for
your business. Each point of a well‐organized program is equally important if
effectiveness is desired. The goal of the four‐point approach is to develop a priority
driven "action plan" your company can follow towards a safer workplace.
POINT 1 – Management Commitment and Employee Involvement
A strong safety and health program begins with firm commitment of the owner
and management of your company. At all times, the owner and management must
express concern and demonstrate commitment for occupational safety and health. If
the owner and management are not dedicated to a successful safety and health
program and prevention and control of occupational hazards, it is likely that employees
will not be interested either. Remember that success starts at the top.
POINT 2 – Worksite Analysis
Once commitment is assured from above, it is a good idea to review the entire business
in an attempt to identify and list all potential occupational exposures. Make a quick
review and identify those that seem imminent threats. Spend some time looking over
this guide, and then review the facility again. It might even be a good idea to bring in a
consultant or a voluntary compliance program like "Work Safe" at this time. Employees
should be encouraged to report potentially hazardous situations without fear of reprisal.
Finally, a review of "near misses" and investigation of accidents that do occur will help
identify situations, machinery, or operations that need to be modified or corrected.
Starting a Small Engine Repair Shop 51
POINT 3 – Hazard Prevention and Control
At this point in the development of your "action plan", you need to spend some time
organizing occupational exposures, required paperwork, recordkeeping, signage, and
training into a priority driven system. Rank your list of "to do's" according to the
imminent threat they pose employees if not immediately undertaken, the capital costs
required to alleviate the threat, and your need for more information if a prevention and
control measure has yet to be determined. After analyzing implement your "action
plan". It should be someone's responsibility to periodically "inspect" the workplace for
hazards, personal protective equipment use, and adherence to company and state
policies and regulations.
POINT 4 – Training for Management and Employees
The most successful programs are engrossed with involvement at all levels of
management and occupation. Start by getting help from other people employed in all
aspects of the company's operation and people in the same business. Develop a safety
and health committee and orient them to safety and health issues, your priority
scheme, and the major tenets of the company's "action plan". Work with these people
to increase overall concern for occupational safety and health issues, smooth the
implementation of change, further your efforts to identify hazards, and prevent and
control exposures. Develop a newsletter committee, or utilize an existing newsletter for
the general promotion of occupational safety and health, as well as to provide written
training on exposures or required prevention and control procedures with broad
bearing. Organize exposed employees on a set and frequent schedule to discuss
common exposures, prevention and control measures, and emergency response
procedures. Meet individually with employees exposed to isolated hazards.
Listed below are standards typically found to apply to automotive repair industries.
Standards are organized in this guide under broad headings and are not necessarily a
reflection of the organizational pattern set forth in the original federal code of
standards. Keep in mind that certain standards (lock‐out/tag‐out, electrical, hazard
communication, personal protective equipment, etc.) may be applicable to multiple
areas and operations of your shop, and should probably be referenced under multiple
headings below. However, duplication of listings has been eliminated in this guide
wherever possible, and by no means is this meant to suggest that these standards do
Starting a Small Engine Repair Shop 52
Safety and Health Program Management and Coordination
o RECOMMENDATION; Designate one person to be responsible for health and safety
o RECOMMENDATION; Maintain procedures for handling employee complaints.
o RECOMMENDATION; Establish awareness procedures for continuous safety and
o OSHA workplace poster.
o Emergency telephone numbers.
o Toxic substance or harmful physical agents (e.g. lead, noise, asbestos standard
o Exiting/Means of egress.
o No eating, drinking, or smoking signs where appropriate.
o OSHA log 200 during the month of February each year.
Medical Services and First Aid
o RECOMMENDATION; Pre‐employment physical examinations for all employees.
o A hospital, clinic, etc. must be within 4 minutes of the facility or an employee must
be trained in First Aid. NOTE; if First Aid trained employees are required, then Blood
Born Pathogen standard applies (see relevant section below).
o Arrangements for medical consultation, especially if respirators are required for any
area or operation at the facility.
o Availability of First Aid kits that have been approved by a local physician. First Aid
kits should be inspected and restocked on a regular basis.
o Track employee illness and injury on either OSHA form 101 or maintain OSHA log
o Maintain employee medical and employee exposure records for bloodborne
pathogens, carbon monoxide, solvents, welding fumes, asbestos, lead, benzene,
ethylene glycol, noise, corrosives, and other toxics.
o Secure arrangements for long‐term maintenance of records. For example, an MSDS
or other record of chemicals used must be maintained for 30 years.
o Maintain permits for lifts, compressors, gas tanks, fire extinguishers, etc.
o Equipment grounding, equipment safety device and fire extinguisher inspection logs.
Starting a Small Engine Repair Shop 53
• Hazard communication
o Plan must;
o List and describe all hazards; hazard characteristics or constituents; availability of
Material Safety Data Sheets (MSDS's); define routes of entry/exposure for each
hazard; discuss signs of exposure; list procedures for preventing and controlling
exposures; describe use of protective equipment; use/availability of engineering
controls; and procedures for responding to each exposure.
o Provide training for employees potentially exposed to hazards. Training program
must also be written, describe the hazard communication standard, and
communicate all aspects of the written plan.
o Maintain a compilation of MSDS sheets.
o Assure that all containers are labeled with the chemical trade name, its hazard
(flammable, irritant, etc.), and target organ effects.
• Emergency medical procedures
o Define whether first aid will be provided on‐site. First Aid must be provided if
medical facilities are not within 4 minutes of the facility.
o If First Aid is to be provided on‐site, responsible personnel must be designated
and adequately trained (see also section describing Blood Born Pathogen
o Provide written procedures and employee training that describe how to
differentiate between incidents requiring only First Aid and those requiring
emergency medical attention; define appropriate name, telephone number and
directions to the closest medical response facilities, or those medical facilities
with which care has been pre‐arranged; and define parties to be informed in
both First Aid and Emergency medical situations.
• Bloodborne pathogens
o Availability of personal protective equipment (gloves in first aid kit, etc.) and
training for all employees is required whether policy is to provide on‐site
medical attention or not. Plan is required if employees will provide first aid.
o Plan should identify those individuals potentially exposed, list available
preventive controls (gloves, masks, shower, etc.), define procedures for First
Aid response, define a schedule for reviewing control effectiveness, provide
procedures for dealing with contaminated equipment, waste and/or
potential exposure, establish a means of tracking and recording incidents,
and document employee awareness training.
Starting a Small Engine Repair Shop 54
o Blood testing should be available to potential source and exposed
employees, and each exposed employee must be given appropriate
counseling concerning precautions to take during the period after the
o Employee awareness training should include; a description of the OSHA
standard for Bloodborne Pathogens, symptamology of bloodborne diseases,
modes of transmission of bloodborne pathogens, the exposure control plan
including control methods and post‐evaluation and follow‐up, and signs and
labels used at the facility.
• Fire prevention and egress
o Document and provide employee training on the availability and use of fire
extinguishers, alarm systems, automatic fire suppression system, and
describe safety procedures, responsibilities, and means of egress during fire
emergencies. Fire extinguishers should be inspected monthly.
• Exposures to toxic or physical agents (e.g. lead, asbestos, noise, etc.)
o Document for each toxic or physical agent; the hazardous effect, routes of
exposure/entry, signs of over‐exposure, use/maintenance/inspection
procedures of protective personal equipment or mechanical and engineered
controls, and procedures for dealing with over‐exposure.
o Respiratory Protection Program (where respirators are used or required)
o Provide respirators in areas where engineering controls do not protect the
health of employees, maintain a respiratory protection program, and require
employees use respirators where appropriate. A respiratory protection
program must include training for respirator users on selection, use,
maintenance, and limitations of respirators. The program must be regularly
evaluated to determine its effectiveness.
o All respirators must be inspected, repaired, and cleaned at least monthly, or
after each use.
o Consult a local physician to determine which employees are physically able
to use the equipment.
o The respiratory protection standard is highly specific. Consult the OSHA
(Health) "Work Safe" program for further detail.
• Assure that the local fire department is aware of fire hazards at your facility.
• Maintain certification of fire alarm system and that sprinkler systems are
frequently inspected and tested by a responsible party or professional.
Starting a Small Engine Repair Shop 55
• Availability of appropriate fire extinguishers that are regularly serviced,
recharged and tagged.
• Periodic (annually recommended) employee training in proper use of fire
extinguishers and fire protection procedures.
• Require eye protection where appropriate (check MSDS for detail).
• Require face shield protection for operations involving welding, cutting, grinding,
or use of abrasive wheels, hand‐tools, etc.
• Require approved protective clothing (aprons, etc.), gloves, and shields where an
employee may be exposed to cuts, bums, skin irritants, caustics or skin absorbed
toxins. Make available and require the use of approved respirators in cases of
emergency or regular use (check MSDS for detail).
• Maintain protective equipment in sanitary condition, sanitize at regular intervals,
and especially if used by multiple employees.
• Make dual eye flush, and in some cases even body showers, available in areas
where injurious or corrosive compounds are used (check MSDS for detail).
Designate eating and drinking areas separate from areas of potential exposure.
• Provide approved protective equipment and require its use for cleaning spills
and leaks of toxic and hazardous chemicals, materials, and liquids; be careful not
to violate other standards during these operations.
General Work Environment
• All work areas must be clean, orderly, and well illuminated. Even elevated
surfaces must be cleaned of dust (combustibles) periodically and provided with
standard guardrail and four‐inch toe board where appropriate. Stacked, piled, or
racked materials must be stored in a manner as to eliminate falling, rolling, etc.
Provide at least two means of egress from any elevated work area. Spills and
leaks must be contained and cleaned immediately.
• All walking surfaces must be clean and slip‐resistant. Aisle space must be
provided and kept clear, especially around machinery. Mark all directional
changes in aisle ways and be sure sufficient headroom is available. Provide
guardrails on walkways elevated more than thirty inches that can handle up to
200 pounds and allow 1.5 inches between rail and mounting. Stairs should be at
least 22 inches wide, made from sound material, especially landings. Mark
landings that exit into traffic.
• Toilets and washing facilities must be provided and cleaned regularly.
• All pits and floor openings must be covered or otherwise guarded; this includes
grates over floor drains.
Starting a Small Engine Repair Shop 56
• All combustible or flammable materials, liquids, debris, etc. must be contained in
approved metal containers and covered.
• All gas or oil fueled devices must be equipped with flame failure controls.
• Mark all doors by purpose; "EXIT", "STORE ROOM", "NOT AN EXIT", etc.
• Do not use portable ladders as permanent fixtures. All metal ladders should be
labeled, "CAUTION! Do Not Use Around Electrical Equipment"
Hand Tools and Equipment
• Use only hand tools that are UL approved and in good condition. Handle and
store tools as to maintain proper working condition.
• Protective equipment such as safety glasses, face shields, etc. must be worn if
tool may produce flying materials or be subject to breakage.
• Inform employees of the hazards of faulty or improper use of tools.
Abrasive Wheel Equipment ‐ Grinders
• All abrasive wheels or grinders must be permanently mounted, grounded with
metallic conduit wiring, have adequate adjusted work rests and tongue,
individual on and off switches, have ample side guards, and splash guards, as
well as dust collection, if necessary.
• Use of protective goggles or face shield is required.
• Training in the safe operation of each machine is required (see manufacturer
• All machinery must be inspected regularly for safe operation.
• Operator must be able to reach all controls from point of operation and be
protected from hazards in that position.
• Machines should not be able to start‐up automatically in power‐outage
situations and low‐level current surges should not be able to start‐up machine.
• All equipment capable of storing energy must be locked‐out and tagged as such
for installation, service, repairs, adjustments, etc. Where power supply
disconnection is not allowed, control circuit must be locked‐out and tagged. A
safety check of locked‐out equipment must be undertaken prior to service,
repair, etc. and may only be conducted by the party designated and trained in
• Define which equipment in your shop store energy (e.g. mechanical, hydraulic,
air, etc.) and differentiate as to whether they are energized by a single or
Starting a Small Engine Repair Shop 57
multiple energy source(s). Electrical equipment not storing other energy and
that are of the cord and plug variety, may simply be unplugged with the plug
remaining in view of whoever is providing service. Other equipment must have
written lock‐out/tag‐out procedures.
• Employees undertaking lock‐out/tag‐out procedures must be trained in lock‐
out/tag‐out procedures and are identifiable by lock, key or tag tracking
mechanisms while undertaking a procedure.
Compressors and Compressed Air
• All compressors should be maintained and operated according to manufacturer
recommendations. All should be equipped with pressure relief valves, pressure
gauges, air intake filters, and guarding that completely encloses the belt drive
• Before repair of compressor, system must be locked‐out and bled.
• Post signs that warn of the automatic start‐up feature of compressors.
• Inspect safety devices on compressors frequently.
• Do not use to clean‐off clothes or body.
• Employees must wear protective chip guarding and other protective equipment
while using compressed air to clean.
• Compressed air abrasive blast cleaning equipment must be equipped with a
manual‐operating valve. Clip‐on chuck and an in‐line regulator must be used
when inflating tires.
• Regularly drain from lowest point of pressure.
• Rated load for hook and bridle must be marked and always visible to operator.
• All hoists must be able to hold up to 125 % of its rated load.
• Do not use hoist chain/rope as a sling and don't carry loads over people.
• RECOMMENDATION: Lifts should have the ANSI (American National Standard
Institute) label of compliance, manufacturer's name, rated load capacity, model,
serial number, and operating instructions clearly posted.
• Lifts must have a locking mechanism in place anytime someone is under the lift.
Some lifts have this feature only when they are fully extended. Compliance for
these lifts requires that all work be conducted with the lift in its fully extended
position. Lifts lacking built‐in, step‐locking mechanisms must be secured with an
adjustable jack able to support three times the lifts rated capacity. Secure the
lift, not the car.
Starting a Small Engine Repair Shop 58
• All employees must be aware of environmental hazards, trained to identify signs
of exposure and over‐exposure, understand how to choose and use protective
equipment, and what to do in emergency or first aid situations. All must be
provided in written form as well.
• Employers should assess employee exposure to any environmental hazard,
including; welding fumes, abrasive or other respirable dust, asbestos, carbon
monoxide, paints, especially epoxies, other solvents, caustics and noise to
determine appropriate training, proper protective equipment and necessary
engineering controls to limit exposure.
• CONSULT THE VOLUNTARY OSHA (HEALTH) "WORK SAFE" PROGRAM TO
DETERMINE IF EXPOSURE STANDARDS ARE SURPASSED AND IF ENGINEERING
CONTROLS ARE NECESSARY.
Flammables and Combustible Materials
• Storage rooms, cabinets and containers must be designed according to rating of
materials to be stored/used in the area. In most cases gravitational or
mechanical ventilation must be provided. In almost all situations, lighting must
be of the explosion‐proof type.
• All containers must be compatible with the material to be stored, fire resistant,
approved as such, and grounded.
• All areas and storage tanks must be labeled with "NO SMOKING" signs.
• All storage tanks, containers, etc. must be equipped with venting.
• Appropriate fire extinguishers must be available wherever
flammables/combustibles are stored. Sprinkler heads must be directed so that
water will not be sprayed into operating electrical switchboards or equipment.
• IT IS HIGHLY RECOMMENDED THAT YOU CONSULT WITH THE OSHA "WORK
SAFE" PROGRAM ON A CASE‐BY‐CASE BASIS!
• All electrical equipment, both portable and permanent must be grounded or
have the means of being grounded.
• All cords must have a grounding conductor.
• No outlets, circuit breakers, switches, or extension cord connections are allowed
within eighteen inches of the floor (class I, division H areas) unless area is
• Employees should inspect all machinery, equipment, and cords prior to
energizing. All hazardous conditions are to be remanded immediately and prior
Starting a Small Engine Repair Shop 59
• All electrical raceways and enclosures (switches, receptacles, junction boxes, etc.
must be secured and provided tight‐fitting covers or plates.
• All electrical contract work must be compliant with OSHA standards.
• Ground Fault Circuit Interrupters (GFCI) are required for new outlets, and
sometimes on existing outlets.
Source: Vermont Pollution Prevention Division, Last Updated: 15 March 1999
Starting a Small Engine Repair Shop 60
Tables for Similar Business that can be Used for Further Analysis
Sales Volume of $10,000 ‐$250,000 Auto Repair Shop Income Breakdown
Sales Volume of 10,000‐250,000
Auto Repair Shop Income Data
Item As a Percentage of Sales
Net sales 100
Cost of Sales 39.32
Gross profit 60.68
General/administrative expense 53.37
Operating profit 7.31
Interest expense .28
Profit before taxes 4.60
Additional Operating Items
Advertising Expense .97
Travel Expense .24
Officer/Executive Salaries 15.76
Note: There will evidently be some differences in the breakdown of revenues and
expenses in auto repair and ATV repair, but there should be similarities due to the
similar characteristics of these types of businesses.
Source: Financial Studies of the Small Business 22nd Edition: Editor‐Karen Goodman
Starting a Small Engine Repair Shop 61
25% Most Profitable
Auto Repair Shop Income Data
Item As a Percentage of Net Sales
Net sales (gross income) 100.0
Cost of Sales 41.19
Gross profit 58.81
General/administrative expenses 39.64
Operating profit 19.17
Interest expense .43
Profit before taxes 16.88
Additional Operating Items
Advertising Expense 1.01
Travel Expense .24
Officer/Executive Salaries 6.85
Note: There will evidently be some differences in the breakdown of revenues and
expenses in auto repair and ATV repair, but there should be similarities due to the
similar characteristics of these types of businesses.
Source: Financial Studies of the Small Business 22nd Edition: Editor‐Karen Goodman
Starting a Small Engine Repair Shop 62
Estimated StartUp Costs Worksheet
Start‐up costs are any expenses endured as part of starting the business. This includes licensing,
legal assistance, and other one‐time‐only costs. Start‐up costs will be substantially higher if they
include a mortgage and the purchasing of all Small Engine Repair Shop equipment. Any start‐up
costs paid with a loan should be factored in as fixed costs equal to the loan payments.
Start Up Necessities Estimated Cost
Starting a Small Engine Repair Shop 63
Revenue Estimate Worksheet
Estimating revenue can be very challenging but is essential for planning the success and
scope of your Small Engine Repair Shop. Pricing should be competitive with other Small
Engine Repair Shops. Secondly, an estimate must be made on the number of customers
you will have per year. Remember that these estimates need to be reasonable, or you
may enter into an unrealistic business venture.
Now we estimate our revenue by taking our three assumed variables:
A) AVERAGE COST OF SERVICE: ______________________________________
B) NUMBER OF CUSTOMERS PER DAY or MONTH: ________________________
C) DAYS OPEN A YEAR: ___________________________________________
Now A X B X C= TOTAL REVENUE
Total Revenue= _______ X _______ X _______ = _______________
A B C Total
Starting a Small Engine Repair Shop 64
Estimated Fixed Costs Worksheet
Fixed costs are monthly or yearly fees that must be paid, and remain relatively constant
no matter the number of guests received a year. These “flat fees” must be accounted
for in a different method than variable costs, which depend on the number of
FIXED COSTS Estimated Costs per Year
*If a loan was taken out to pay start‐up costs, then the loan payments should be
Starting a Small Engine Repair Shop 65
Variable Costs Worksheet
Variable costs are costs only experienced when there are customers. These increase
when there are more customers and do not exist without customers. One example
would be estimated supply expenses per customer for the average repair. These are
more difficult to estimate, because you need to estimate the per customer cost rather
than the yearly cost.
Variable Costs Estimated Cost Per Customer
This total gives you the variable cost per customer for your small engine repair shop.
Now for the total variable cost per year we take the TOTAL from above and multiply it
by the estimated number of customers per year to estimate total yearly variable cost.
_____________ X _______________________ = _______________________________
TOTAL Estimated Customers a Year Estimated Yearly Variable Cost
Starting a Small Engine Repair Shop 66
Profit and Loss Statement
Gross Sales $__________________
Less Returns and Allowances ‐ $__________________
Net Sales $__________________
Cost of Sales $__________________
Gross Profit $__________________
Payroll Taxes $__________________
Employee Benefits $__________________
Transportation Expenses $__________________
Dues and Fees $__________________
Legal & Accounting $__________________
Office Supplies $__________________
Telephone & Internet $__________________
Taxes and Licenses $__________________
Total Operating Expenses $__________________
Operational Profit (Loss) $__________________
Other Income and Expenses $__________________
Net Income (Loss) Before Taxes $__________________
Income Tax $__________________
Net Income (Loss) $__________________
Starting a Small Engine Repair Shop 67
Pro forma balance sheets and cash flows are similar to traditional balance sheets and cash flows,
but they predict what will happen to your business in the future, so you can see where your
money will be going and whether to expect a profit or a loss.
Cash and equivalent $__________________
Accounts receivable $__________________
Total Current Assets $__________________
Less total depreciation ‐ $__________________
Net Total Fixed Assets $__________________
Total Assets $__________________
Accounts payable $__________________
Short‐term debt $__________________
Current portion of long‐term debt $__________________
Income tax payable $__________________
Accrued expenses $__________________
Total Current Liabilities $__________________
Long Term Debt $__________________
Total Debt and Liabilities:
Starting a Small Engine Repair Shop 68
Cash Flow Statement
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6
Beginning Cash Balance $_______ $_______ $_______ $_______ $_______ $_______
Cash sales $_______ $_______ $_______ $_______ $_______ $_______
Accounts receivable collections $_______ $_______ $_______ $_______ $_______ $_______
Other $_______ $_______ $_______ $_______ $_______ $_______
Total Cash Receipts $_______ $_______ $_______ $_______ $_______ $_______
Inventory $_______ $_______ $_______ $_______ $_______ $_______
Salaries and wages $_______ $_______ $_______ $_______ $_______ $_______
Fixed assets $_______ $_______ $_______ $_______ $_______ $_______
Rent $_______ $_______ $_______ $_______ $_______ $_______
Insurance $_______ $_______ $_______ $_______ $_______ $_______
Utilities $_______ $_______ $_______ $_______ $_______ $_______
Interest $_______ $_______ $_______ $_______ $_______ $_______
Advertising $_______ $_______ $_______ $_______ $_______ $_______
Taxes $_______ $_______ $_______ $_______ $_______ $_______
Other payments $_______ $_______ $_______ $_______ $_______ $_______
Total Cash Disbursed: $_______ $_______ $_______ $_______ $_______ $_______
Total Operational Cash Surplus (Deficit) $_______ $_______ $_______ $_______ $_______ $_______
Additional Funding (Repayment) $_______ $_______ $_______ $_______ $_______ $_______
Ending Cash Balance $_______ $_______ $_______ $_______ $_______ $_______
Starting a Small Engine Repair Shop 69
FREE PUBLICATIONS FOR ALASKA SMALL BUSINESS OWNERS
• Alaska Economic Development Resource Guide (19th Edition, October 2007) – An
inventory of programs and services which can provide technical and financial
assistance to Alaska communities and businesses. Published by the Alaska
Department of Commerce, Community and Economic Development, Division of
Community Affairs. Available at http://www.dced.state.ak.us/dca/edrg/EDRG.htm.
• Alaska Small Business Resource Guide – Offers advice, contacts, and information to
help Alaska business owners succeed. Available at any First National Bank Alaska
branch or the Alaska Small Business Development Center.
• Establishing a Business in Alaska Reference Guide (13th Edition, March 2006) –
Provides information regarding critical steps to take before starting a business, such
as: license, regulatory, tax and labor law requirements; business assistance
information; financial institutions; and environmental protection requirements.
Published by the Alaska Department of Commerce, Community and Economic
Development, Office of Economic Development. Available on CD‐ROM or download
• Starting Your Small Business (Spring‐Summer 2007) – A general guide to starting a
small business in Alaska, including lending resources. Published by the Alaska
Department of Commerce, Community and Economic Development, Office of
Economic Development. See
• The Small Business Resource Guide – A reference guide for small business and self‐
employed taxpayers. Available from the Internal Revenue Service on CD‐ROM or
download at http://www.irs.gov/businesses/small/article/0,,id=101169,00.html.
• Alaska Business Monthly http://www.akbizmag.com
907‐276‐4373 ◦ firstname.lastname@example.org
501 West Northern Lights Boulevard, Suite 100, Anchorage, AK 99503
• Alaska Journal of Commerce http://www.alaskajournal.com
907‐561‐4772 ◦ email@example.com
301 Arctic Slope Avenue, Suite 350, Anchorage, AK 99518
Starting a Small Engine Repair Shop 70
ALASKA REGIONAL DEVELOPMENT ORGANIZATIONS (ARDORs)
The Alaska Legislature established the ARDOR program in 1988 to stimulate economic
development. The ARDORs:
o Enable communities to pool their limited resources and work together on
economic development issues
o Develop partnerships among public, private and other organizations
o Offer a technical, nonpartisan capacity to develop and implement an economic
o Often have extensive experience with federal/state programs
o Provide needed technical assistance via direct links with local citizens.
• Anchorage Economic Development Corporation http://www.aedcweb.com
907‐258‐3700 ◦ firstname.lastname@example.org
900 West Fifth Avenue, Suite 300, Anchorage, AK 99501
• Bering Strait Development Council (Kawerak) http://www.kawerak.org
877‐219‐2599 ◦ email@example.com ◦ P.O. Box 948, Nome, AK 99762
• Copper Valley Economic Development Council
907‐822‐5001 ◦ firstname.lastname@example.org ◦ P.O. Box 9, Glenallen, AK 99588
• Fairbanks North Star Borough Economic Development Commission
907‐459‐1309 ◦ email@example.com
809 Pioneer Road, Fairbanks, AK 99707
• Kenai Peninsula Economic Development District http://www.kpedd.org
907‐283‐3335 ◦ firstname.lastname@example.org
14896 Kenai Spur Highway, Suite 103A, Kenai, AK 99611
• Lower Kuskokwim Economic Development Council http://www.lkedc.org
907‐543‐5967 ◦ carl_berger@ddc‐alaska.org ◦ P.O. Box 2021, Bethel, AK 99559
• Mat‐Su Resource Conservation and Development Council
907‐373‐1062, extension 108 ◦ email@example.com
1700 East Bogard Road, Wasilla, AK 99654
• Northwest Arctic Borough Economic Development Department
800‐478‐1110 ◦ firstname.lastname@example.org ◦ P.O. Box 1110, Kotzebue, AK 99752
• Prince William Sound Economic Development District http://www.pwsedd.org
907‐222‐2440 ◦ email@example.com
2207 Spenard Road, Suite 207, Anchorage, AK 99503
Starting a Small Engine Repair Shop 71
• Southeast Conference http://www.seconference.org
907‐523‐2310 ◦ firstname.lastname@example.org
612 West Willoughby Avenue, Juneau, AK 99802
• Southwest Alaska Municipal Conference (SWAMC) http://www.swamc.org
907‐562‐7380 ◦ email@example.com
3300 Arctic Boulevard, Suite 203, Anchorage, AK 99503
OTHER SMALL BUSINESS RESOURCES
• Alaska Department of Commerce, Community & Economic Development, Office of
Economic Development http://www.commerce.state.aka.us.oed/home.htm
o Small Business Assistance Center
907‐269‐8104 ◦ firstname.lastname@example.org
550 West 7th Avenue, Suite 1770, Anchorage, AK 99501
o Made in Alaska (MIA) http://www.madeinalaska.org/mia/
• Alaska Manufacturing Extension Partnership (AMEP) http://www.ak‐mep.org
907‐279‐2637 ◦ info@ak‐mep.org
701 Sesame Street, Suite 200, Anchorage, AK 99503
o Ecommerce program: Alaska Manufacturing, Business, Industrial, and
Technology Projects (AMBIT) http://www.ambit.cc
• Alaska Small Business Development Center (SBDC) http://www.aksbdc.org
907‐274‐7232 430 West 7th Ave, Suite 110, Anchorage, AK 99501
907‐456‐7232 604 Barnette Street, Suite 220, Fairbanks, AK 99701
907‐463‐3789 3100 Channel Drive, Suite 306, Juneau, AK 99801
907‐260‐5629 43335 Kalifornsky Beach Road, Suite 12, Soldotna, AK 99669
907‐373‐7232 201 North Lucille Street, Suite 2A, Wasilla, AK 99654
o BuyAlaska www.buyalaska.com
800‐478‐2332 ◦ email@example.com
o Procurement Technical Assistance Center (PTAC)
o Rural Outreach 907‐274‐7232
• Alaska Village Initiatives http://www.akvillageinitiatives.com
800‐478‐2332 ◦ firstname.lastname@example.org
1577 C Street, Suite 304, Anchorage, AK 99501
• Americans with Disabilities Act (ADA) http://www.ada.gov
Starting a Small Engine Repair Shop 72
• Kauffman Foundation, EntreWorld http://eventuring.kauffman.org
• Occupational Safety and Health Administration (OSHA) http://www.osha.gov
907‐271‐5152 ◦ 222 West 8th Avenue, Room A14, Anchorage, AK 99513
• SCORE – Free small business counseling. http://www.akscore.org
907‐271‐4022 ◦ email@example.com ◦ 510 L Street, Suite 310, Anchorage, AK 99501
• Small Business Administration (SBA) http://www.sba.gov
800‐827‐5722 ◦ firstname.lastname@example.org
• University of Alaska Center for Economic Development – Feasibility analysis,
market research, business planning, and business implementation assistance for
nonprofits and municipal and tribal governments. http://www.ced.uaa.alaska.edu
907‐786‐5444 ◦ email@example.com
4500 Diplomacy Drive, Suite 507, Anchorage, AK 99508
Starting a Small Engine Repair Shop 73